Which cities will be hit hardest by coming Fed rate hike?

The Federal Reserve is expected to raise interest rates on Wednesday, a move that could affect those with credit card debt.

The Federal Reserve is expected to raise interest rates on Wednesday, a move that will likely have wide-reaching impact. Higher rates mean it gets more expensive to borrow money – and that impacts people who carry a credit card balance.

“Most credit cards and other revolving lines of credit, such as home equity lines of credit, typically have a variable interest rate associated and these rates are tied to some index,” says Kaya Ledejobi, a CFP at Earn Into Wealth Strategies. “Once the index, or prime rate [the interest rate that banks charge customers] goes up, you can expect the overall interest rate on your credit card to rise as well.”

As a matter of fact, the Fed has raised interest rates five times since December 2015 – the federal funds rate is now at 1.5% – which WalletHub says is costing credit card users an extra $6.8 billion in interest. That could be one reason why American credit card debt reached more than $1 trillion in 2018, the most since 2007. Consumers have seen credit card APR’s increase steadily since the Fed began raising rates. In December 2015, the average APR was 14.96%; a year later it jumped to 15.18%; and reached 16.18% by the end of 2017, according to CreditCards.com.

Some cities will be hit harder than others when rates creep higher, a recent report from WalletHub found. Wallethub pinpointed the cities with the most and least sustainable credit card debt. By comparing 2,500 cities, the credit card site was able to gauge how long it takes the average person to pay off debt, and by how much balances have increased.

One of the least sustainable cities is Miami Beach, Fla., where 55% of the population has credit card debt, with an average of $11,685 per household. The cost of previous rate hikes added $175 to the average credit card debt in this city.

Another top city with unsustainable debt is Beverly Hills, Calif., where 61% of people have credit card debt, averaging $17,885. Previous rate hikes have added $268 to the debt owed by an individual.

On the other hand, there are a handful of cities that have less or more manageable debt. Just 18.4% of the population in Darlington, S.C.. has credit card debt, and owe an average amount of $4,343. The cost of previous rate hikes added just $65 to the average credit card debt in this city.

Same goes for Detroit, where 25% of the population has credit card debt, with an average balance of $5,223. Previous rate hikes added just $78 to the average debt.

The upcoming hike means that consumers need to be more diligent about paying off their credit cards. Ideally, you would pay your credit card in full every month. If that doesn’t fit in your budget, paying the minimum payment due every single month is non-negotiable, but even that could get more expensive.

“As interest rates rise, so will your cost of borrowing and your minimum monthly payment due will also rise,” says Ledejobi. “To avoid financial hardship, you should do everything in your power to reduce debt by borrowing less and paying extra as often and as early as you can.”

Brittany is reporter at Yahoo Finance. Follow her on Twitter @bjonescooper.